German economy rebounds in 2nd quarter but short of forecast

International

FILE – In this Oct. 30, 2007 file photo, employees are silhouetted at the Boehringer Ingelheim pharmaceutical factory in Ingelheim, central Germany. Official data shows that Germany’s unemployment rate dipped to 5.6% in July. Such a decline is unusual for the summer month and shows that Europe’s biggest economy is recovering from the COVID-19 pandemic. (AP Photo/Michael Pobst, file)

BERLIN (AP) — Germany’s economy grew by 1.5% in the second quarter compared with the previous three-month period, picking up after a sharp first-quarter fall but less strongly than expected.

The figure released Friday by the Federal Statistical Office fell short of the 2% gain economists had forecast. In addition, the first-quarter decline was sharper than previously reported — a 2.1% drop in gross domestic product, rather than the 1.8% reported in May.

Second-quarter GDP was 9.2% higher than a year earlier, in price- and calendar-adjusted terms. Last year’s second quarter saw the strong initial impact of the coronavirus pandemic on the German economy, Europe’s biggest.

This year’s April-June period saw infections flare up again and then decline to a very low level, prompting authorities to relax many restrictions, while the country’s vaccination campaign picked up speed.

Despite the upturn, which was attributed to higher household and government spending, the economy hasn’t yet returned to its pre-pandemic size. The statistics office said GDP was still 3.4% lower in the second quarter than it was in the final quarter of 2019, the last one before the pandemic started.

Carsten Brzeski, an economist at ING, said the gap between upbeat confidence indicators and the hard data was due to “the long list of supply chain frictions,” including the disruption caused by a ship blocking the Suez Canal and delays in the production and delivery of microchips and semiconductors.

Any new restrictions prompted by the more contagious delta variant of the coronavirus “could easily derail a further acceleration of the economy,” but significant new restrictions that could undermine economic activity aren’t likely with a national election due on Sept. 26, he added. Continuing supply chain issues and rising inflation could also dent growth and spending.

Despite those risks, “we expect the German economy to return to pre-crisis levels before the end of the year,” Brzeski said.

The Federation of German Industries, Germany’s main industry lobby group, also warned of possible pitfalls ahead.

“The global fourth corona wave and persistent delivery difficulties with primary products threaten to endanger the still-intact German and European economic recovery in the second half,” the group’s director general, Joachim Lang, said in a statement.

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